Less Than 20 Percent of CUs That Became Significantly Undercapitalized Are Still Active

Less than 20 percent of credit unions that become significantly undercapitalized are still active or independent, according to the National Credit Union Administration.

Over a 20 year period ranging from the second quarter of 1996 through the second quarter of 2016, 2,502 federally insured credit unions fell below the well-capitalized threshold (net worth ratio below 7 percent) after having a net worth ratio above that threshold for at least one quarter.

This indicates that over the 20 year period approximately one in five credit unions fell below the well-capitalized threshold.

The net worth ratio of 825 of these 2,502 credit unions fell below 4 percent -- the threshold for being significantly undercapitalized. Only 151 of these credit unions (18 percent) remained active.

The net worth ratio of 490 of these 2,502 credit unions eventually fell below two percent -- critically undercapitalized. Importantly, only 15 percent of those credit unions whose net worth dropped below two percent sometime in this period remain active.

Undercapitalized Credit Unions, Q3 2014

There were 47 federally-insured credit unions that were undercapitalized as of Sepember 30, 2014.

Seven credit unions were critically undercapitalized, while 9 credit unions were significantly undercapitalized.

One of the critically undercapitalized credit unions was closed -- County & Municipal Employees in Edinburg, TX. Another critically undercapitalized credit union -- Health One -- is under NCUA conservatorship.

Three credit unions were classified as undercapitalized, although their leverage ratio exceeded 7 percent.

Below is a list of undercapitalized credit unions. Click on the image to enlarge.

Undercapitalized Credit Unions, June 30, 2014

As of June 30, 2014, there were 60 undercapitalized credit unions in the United States.

These undercapitalized credit unions held slightly more than $3.4 billion in assets.

Six credit unions were classified as critically undercapitalized, while 14 credit unions were significantly undercapitalized.

Four credit unions that were classified as undercapitalized had net worth ratios in excess of 6 percent. However, their net worth ratios did not meet the minimum risk-based net worth requirement.

Undercapitalized CUs, Q1 2014

Sixty-three credit unions were undercapitalized at the end of the first quarter of 2014. This was an increase of two credit unions from the end of 2013; but down 31 credit unions from a year ago.

The 63 undercapitalized credit unions reported slightly more than $3.5 billion in assets at the end of the first quarter of 2014.

Four credit unions were critically undercapitalized. Another 13 credit unions were significantly undercapitalized.

Although four credit unions had net worth leverage ratios in excess of 6 percent, their risk-based net worth ratios indicated that they were undercapitalized.

Undercapitalized Credit Unions, Q4 2013

There were 61 undercapitalized credit unions at the end of 2013. This down from 68 credit unions at the end of the third quarter of 2013 and 91 credit unions at the end of 2012.

Five credit unions were critically undercapitalized and 7 were significantly undercapitalized.

Click on images to enlarge.

Undercapitalized Credit Unions, Q3 2013

At the end of the third quarter of 2013, there were 68 credit unions that were undercapitalized. This is down from 82 credit unions as of June 2013 and 104 credit unions from a year ago.

Three credit unions were critically undercapitalized and 13 credit unions were significantly undercapitalized, as of September 30th.

In addition, several complex credit unions were classified as undercapitalized because their risk-based net worth ratios exceeded their net worth ratios.

Undercapitalized Credit Unions, June 2013

There were 82 credit unions that were undercapitalized as of June 2013. Seven credit unions were critically undercapitalized and 15 credit unions were significantly undercapitalized.

Click on the images to enlarge.

Undercapitalized Credit Unions, Q1 2013

At the end of the first quarter of 2013, 94 credit unions were undercapitalized. These undercapitalized credit unions held almost $4.5 billion in assets.

Eight credit unions were critically undercapitalized and 14 credit unions were significantly undercapitalized.

Since the end of the first quarter. three undercapitalized credit unions were liquidated by NCUA (names in red).

Undercapitalized CUs, Dec. 2012

There were 91 undercapitalized credit unions at the end of 2012.

Seven credit unions were critically undercapitalized. Another fifteen credit unions were significantly undercapitalized.

Nine credit unions were classified as undercapitalized, even though their net worth (capital) ratios were 6 percent or higher. These 9 credit unions were not holding enough net worth relative to their risk-based requirement.

Below is a list of undercapitalized credit unions at the end of 2012. (click on the image to enlarge)

Undercapitalized Credit Unions, September 2012

As of September 30, 2012, there were 104 credit unions that were undercapitalized. This was down from 120 credit unions as of June 2012 and 165 credit unions, as of September 30, 2011.

Six credit unions were critically undercapitalized and another 14 credit unions were significantly undercapitalized, including two credit unions that received Section 208 net worth assistance from NCUA.

NCUA announced in October the merger of two critically undercapitalized credit unions -- El Barrio and NorthCounty Cooperative.

Several credit unions were classified as undercapitalized, although they met the minimum net worth leverage ratio of 6 percent to be adequately capitalized. This is most likely due to them being classified as complex credit unions and they are not meeting their risk-based net worth requirement.

Undercapitalized Credit Unions, June 2012

There were 120 undercapitalized credit unions with $7.25 billion in assets as of June 30, 2012.

This is down from 132 undercapitalized credit unions at the end of the first quarter of 2012.

Seven credit unions were critically undercapitalized and 21 credit unions were significantly undercapitalized.

Undercapitalized Credit Unions, March 2012

As of March 31, 2012, there were 132 undercapitalized credit unions -- down from 138 credit unions as of the end of 2011. These 132 undercapitalized credit unions held a combined $7.48 billion in assets.

Nine credit unions were critically undercapitalized. Thirty-two credit unions were significantly undercapitalized.

Undercapitalized Credit Unions, December 2011

As of December 31, 2011, there were 138 credit unions with $7.2 billion in assets that were classified as undercapitalized. This is down from 165 undercapitalized credit unions as of September 2011.

There were 4 credit unions that were classified as undercapitalized, although their net worth ratios exceeded 6 percent. These 4 credit unions were subject to a risk based net worth standard because they were designated as complex credit unions.

Significantly or Critically Undercapitalized Credit Unions

A credit union is considered significantly undercapitalized, if its net worth ratio is below 4 percent. A credit union with a net worth ratio below 2 percent is critically undercapitalized.

Below is a list of credit unions that have a net worth ratio below 4 percent as of the end of 2010 (click to enlarge the image). Some of these credit unions are no longer independent. NCUA has either closed the credit union or the credit union has been acquired by another credit union.

Credit Unions with Net Worth Ratios Below 6 Percent, June 2010

As of June 2010, there were 182 federally-insured credit unions that had net worth leverage ratios below 6 percent.

A net worth ratio below 6 percent is associated with being undercapitalized.

These 182 credit unions held approximately $26.8 billion in assets.

Fifteen of these 182 credit unions were critically undercapitalized -- net worth ratio below 2 percent. Most of these critically undercapitalized credit unions have either failed or been merged into a healthy credit union.

Below is a list of credit unions with net worth ratios below 6 percent. (click on images to enlarge).

Undercapitalized CUs Exceeding Member Business Loan Limit

There are 74 undercapitalized federally-insured credit unions, which report holding outstanding member business loans, that cannot increase the total amount of outstanding member business loans as of March 2010. The Federal Credit Union Act states that an insured credit union that is undercapitalized may not increase the total amount of member business loans outstanding until such time as the credit union becomes adequately capitalized.

Furthermore, the maximum amount of outstanding member business loans must equal 1.75 times the credit union's net worth and cannot exceed 12.25 percent of assets. An exception to the maximum cap of 12.25 percent of assets is granted to an insured credit union chartered for the purpose of making, or that has a history of primarily making, member business loans to its members; or an insured credit union that serves predominantly low-income members or is a community development financial institution is not subject to the 12.25 percent cap.

Out of these 74 undercapitalized federally-insured credit unions, 14 credit unions will need to shrink their member business loan portfolios to be in compliance with the Federal Credit Union Act. Two of these credit unions have subsequently failed -- Tracy FCU and Southwest Community FCU. Below is a list of the 14 credit unions that are exceeding their statutory member business lending limit. (click on image to enlarge)